Impact of COVID-19 on Self Storage
At the start of 2020, the self storage market was not without a number of challenges. Oversupply, consolidation, and rising advertising costs continued to plague the industry. With rising vacancy rates, many operators turned to short-term fixes, like free rent and deep discounts, to attract new renters.
In what seemed like an instant, our nation ground to a halt due to the COVID-19 pandemic. With millions out of work and small businesses shutting their doors, our economy took a historic hit, prompting the Federal government to step in with a $2T relief package. In the wake of COVID-19, storage operators have shifted their concerns from oversupply and dropping rents to leasing without human interaction and maintaining staff.
Economic Outlook for Self Storage
With interest rates at an all-time low, real estate investors have an opportunity to refinance to help weather the storm. While commercial real estate at large may see some contraction, COVID-19 is not expected to negatively impact self storage. On March 20, Goldman Sachs forecasted the United States GDP to fall 6% in the first quarter of 2020 and then contract a staggering 24% in the second. Although the demand slowdown will have the greatest impact on the restaurant, entertainment, and travel industries, Marcus & Millichap expects very little impact on the demand for storage units. Occupancy rates for storage remain strong. Despite the oversupply of units at the end of 2019, with impacts on the global supply chain and slowing construction in the wake of coronavirus, new inventory levels could take a dip through the first half of 2020.
Treasury Secretary Steven Mnuchin warns US unemployment could reach as high as 20% – leaving 32 million Americans out of work. This may lead to lost leases and requests for concessions or lower rents. While payment forbearance and eviction concessions are being required for housing, the same rules generally do not apply to storage. As a storage owner, you have the right to charge late fees or evict for non-payment. However, such measures during this crisis could mean bad PR for your property.
States have implemented various stay-at-home measures to curb the spread of the coronavirus, limiting non-essential activity or mandating residents to shelter-in-place. While self storage facilities may not be required to close entirely, operators need to be aware of restrictions at the state or local level, in addition to recommendations from the CDC about social distancing. Many operators may need to delay opening new storage facilities until after states and localities ease these restrictions.
Online Leasing is Booming
In the month of March, as local businesses grappled with the “new normal” that kept customers at home, G5 Uber Leasing clients saw a 39% uptick in online leasing interactions between February and March 2020. Under ordinary circumstances, online leasing allows renters to sign a lease when it’s convenient for them. The importance of online leasing is further highlighted by the stay-at-home orders and fear of infection that are keeping many Americans at home. Requiring tenants to visit your office to fill out paperwork puts your staff at risk of being infected. Even if you maintain regular office hours, local mandates to shelter-in-place may limit your ability to remain open. Online leasing fills the gap by providing an alternate, immediate path for renters in need of storage.
At the start of the COVID-19 crisis, a number of universities were forced to shut their doors, sending students flocking to find self storage. Unlike their predecessors, this new generation of renters – Gen Z – has never known a time without online shopping – and that’s been a boon for businesses offering online leasing. According to one G5 customer, online leases accounted for 20% of net new leases between March 1 and 11. From March 12 through 17, that number jumped to 31% (a 55% increase in online leases).
Marketing During a Crisis
According to Forbes, businesses that keep their marketing machines humming and healthy during a crisis or recession typically come out on top. Now is the time to shift priorities to help your properties pull through these tough times. Marketing can work to your advantage, especially during and after a crisis. You may need to adjust your plans now, but maintaining a steady presence will ensure long-term results. To learn more about marketing during a crisis, read our blog or check out our Best Practices for Digital Marketing During a Crisis checklist.
Report Reveals Key Industry Insights
The 1H 2020 Self Storage State of the Industry report highlights key industry trends and shows how to utilize digital marketing tactics to stay out in front of the competition, better control and predict marketing costs, and generate higher quality leads. By using data and understanding renters, self storage operators are much more likely to get the right leads — and reduce wasted time and money on those that are less likely to convert.
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